World Arms Outlays: Down, Down, Down

ByDavid R. FrancisApril 23, 1993

WORLD defense spending is going down. The trend started about 1987 but has accelerated since the end of the cold war and the breakup of the Soviet empire.

In the United States, military expenditures peaked in 1986 at about $300 billion (in 1988 dollars). Last year they were under $250 billion in the same constant dollars, and, if budget projections prove true, will fall to under $150 billion by 1997.

In the European Community, combined defense spending ran around $150 billion in constant 1988 dollars from about 1982 through 1991, according to a report by DRI/McGraw-Hill analysts Farid Abolfathi and Matthew d`Arbeloff. EC spending should decline to about $75 billion by 1997.

These changes, Mr. Abolfathi notes, are having an economic impact on a global scale. Weapons procurement has declined even faster than other military expenditures, such as those for salaries, operations, and maintenance. For example, annual US weapons purchases in constant 1988 prices have dropped to less than $60 billion in 1992 from about $80 billion in 1987. West Europe's procurement in the same period has declined to $26 billion from $36 billion.

Defense companies and their employees in California, New England, and elsewhere are keenly aware of this trend.

In the former communist nations of East Europe and the former Soviet Union, defense outlays have plunged even more sharply.

In the developing countries, military spending peaked in 1983 at $192 billion in constant 1989 dollars and fell to $168 billion by 1989, according to the United States Arms Control and Disarmament Agency. That's about 16 percent of world defense spending.

Since then, military outlays by poorer countries have likely not changed much. One expert guessed up; another down. World totals have not yet been compiled for more recent years.

The managing director of the International Monetary Fund, Michel Camdessus, frequently urges member nations to cut military spending to free up investment money for civilian purposes. When developing countries undergo their annual IMF "surveillance," the officials may employ some "moral suasion" to encourage those nations spending a relatively large proportion of output on defense to cut back. But the level of defense spending has not been made a "condition" for IMF loans. Since military might is regarde d as a key ingredient of sovereignty, members of the multilateral fund have not approved such pressure.

The World Bank has been trying to encourage disarmament by providing loans for "defense conversion." Countries such as Uganda have received money for demobilization, helping soldiers turn to civilian activities.

"That's a good way to go," says Nicole Ball, an analyst with the Overseas Development Council in Washington.

Abolfathi and Mr. d'Arbeloff also note that the international arms trade has shrunk dramatically. "World exports of major weapon systems have declined by more than 53 percent since 1987. This decline would have been much sharper if it were not for a surge in imports to the Middle East after the 1991 Gulf War."

They expect the overseas defense market to continue a rapid decline. Defense spending, however, has gone up considerably in China, Taiwan, Indonesia, Malaysia, South Korea, and Burma. Since 1990, the DRI experts note, Asian countries have ordered arms imports valued at more than $20 billion. They are considering orders of a similar amount within the next two years.

China's announced military budget has quadrupled in the last four years. There could be more spending beyond this public budget. "We don't know what the real budget is," Ms. Ball says.

Middle East nations have ordered $50 billion in armaments since 1990. Saudi Arabia accounts for half of that, Kuwait and Iran for about 20 percent each, and the United Arab Emirates about 10 percent, according to the DRI study.

Abolfathi points out that the cuts in world military expenditures have aggravated world economic problems, coming at a time of recession and corporate restructuring in the industrial world. They also slowed the recovery in the US.

Many liberal economists, though, welcome the cuts as a reduction in economic "waste."